Susan Dunlop has warned the food and drink sector to prepare for Brexit challenges

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Exporting companies in Scotland’s booming food and drink sector should be preparing for the anticipated challenges of Brexit, one of the “Big Four” accountancies has warned.

Susan Dunlop, who leads the food and drink sector for KPMG in Scotland said that despite the Scottish sector’s 11 per cent increase in food and drink exports in the first quarter of 2017, which generated around £1.2 billion, the sector must plan for the anticipated financial challenges of leaving the EU, to ensure that it can remain competitive on cost, adequately staffed, and compliant with the regulatory requirements of selling to European consumers.

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She said: “In the short-term, financial pressure on food producers could potentially be reduced by passing supply chain costs induced by supermarket margins on to the end consumer. However, fiercely competitive pricing in food retail has made it increasingly difficult for food producers to share costs at the final retail stage.”

The Scottish food and drink sector has traditionally focused on a relatively narrow band of products at the high-quality, branded area of the market, where pricing can be protected.

Whisky accounts for more than three-quarters of the total rise in Scottish food and drink being sold in Japan (Image: Getty)

However Dunlop warned: “In facing cost pressures head on, it is vital for companies to adopt more flexible thinking and continually assess business strategies, such as using alternative supplier partnership models or driving innovation and substituting raw materials.

“The anticipated time to agree and implement new EU trading terms will also present a window of opportunity to consider potential scenarios and plan for these anticipated challenges and market trends in both the short and long term.

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“Now is the time to consider any requirements to establish EU subsidiaries, apply for European regulatory licenses, and run defensive scenarios to consider business resilience in the face of changing VAT or custom codes, reduced access to EU migrant workers, or increased costs of storage and warehousing overseas.”

She added: “As the sector continues to respond and adapt to both the challenges and opportunities of a Brexit decision, future winners will be those companies that have a resilient supply chain, a responsive strategy, and an excellent customer relationship.”